How does a startup break into an established market?

I have said before that for every question there’s more than one correct answer and this question is an example of that. I have been in my fair share of start-ups and in each case we were trying to sell against an incumbent company that owned a large market share. Oddly enough, many of the start-ups I have been involved with that incumbent has be Cisco.

Cisco is a big budget company with established products, good people and a commanding position in the eyes of its customers. You have probably heard the saying that nobody gets fired for buying Cisco. Cisco sales people have been known to offer customers perks like golf tournaments and fishing trips. How does a start-up compete with that?

In a previous post I commented that customers buy the salesman first and the product second. That holds true for Cisco just like any other company, so not only do you have to compete against a quality product and costly perks, you have to convince the customer that you are a better person. In many larger enterprises you also have to convince the buyers that your product has similar quality and that may mean costly certifications and inter-op testing.

The thing to remember when faced with the seemingly impossible uphill battle is that every problem has facets that will not fit the large corporate solution. The big guys may have the perks but they don’t have the maneuverability. Start by completely understanding the customers requirements. Listen closely for something that you might be able to do to make the solution better.

Several of the companies that I have worked at have solved the problem by paying special attention to key customers. If your company has a team that can do system integration for example, they may be able to bundle your product with some extra external pieces to deliver a custom solution that a big box shop would never be able to support. This could be as simple as adding a motion sensor to start a video conference or as complex as a completely separate VoIP phone system to handle translation services. If you can get the extra functionality written into the customers specification, then it becomes almost impossible for a big company to displace you.

The down side of the custom work is that it will have to be supported going forward. If you do the work with that in mind however, the on going support can be a re-occurring revenue stream. You may be able to get up front Non Reoccurring Engineering (NRE) dollars as well. The object of any development team is to be a profit center so don’t get stuck supporting something without getting paid to do it.

There was a company in Ottawa in the 80’s called Gandalf. They had a completely separate team assigned to what they called “Customer Specials”. Without that team they would not have been able to land key accounts. Newbridge Networks had a similar team called “Applications Engineering” and Mitel has a group called “Professional Services”. All examples of how paying special attention to customers can win sales, maintain customer loyalty and be profitable.